Mr. Hammond: I beg to move amendment No. 38, in page 33, line 21, at end insert—

'(2A) In section 18 of the Act (conciliation) after subsection (7) there is inserted

''(7A) Notwithstanding the provisions of subsection (7) above, where the conciliation officer believes that any party to a conciliation procedure has behaved in a manner which ought to be conveyed to the Tribunal, he may make a report in writing of such matter to the Tribunal and the Tribunal shall take account of any such reported behaviour in making any order under section 13 above.''.'.

This is a much more substantive point, and we have already touched on the arguments earlier this afternoon. The amendment would insert a new subsection after section 18(7) of the Employment Tribunals Act 1996. Subsection (7) specifies that anything communicated to a conciliation officer must remain confidential unless the person who communicated it allows its release. Clause 24 introduces conciliation as a critical part of the procedure that deals with cases that can come to a tribunal. The Minister is sticking to the use of vexatious, unreasonable and so on as the qualifying definition for cases in which costs or preparation time compensation might be awarded. It is self-evident that a party's approach to the conciliation procedure should also be a major factor in reaching an informed decision about whether that party has behaved reasonably.

The Minister is rightly introducing a requirement to go into a period of conciliation. Let us consider a situation in which a party enters that conciliation process with the clear view that it is engaged in only a pro forma exercise. It shows no intention of negotiating or listening to the conciliation officer, and ignores any advice to either party that the case is unsustainable and the parties should reach a compromise. The party demands his day in the tribunal. Such conduct should be taken into account by the tribunal in determining whether it is reasonable to award costs, because it is vexatious and unreasonable within the overall process that the Minister describes.

The conciliation officer should report routinely to the tribunal on the conciliation procedure, or at his discretion, if he believes that the tribunal should take account of the conduct of either party in reaching its decision. However, as the law stands at present, he is constrained from making the conduct of the parties known to the tribunal because of the effect of section 18(7) of the Employment Tribunals Act 1996.

The Minister is committed to the principle of confidentiality; he thinks that the ability that parties have to speak in confidence to a conciliation officer will help in achieving a conciliated settlement. The argument is persuasive for the substance of what is said. People are tempted to divulge information to the conciliation officer that they would not want repeated in the open tribunal. However, I do not see why that should prevent the conciliation officer from reporting to the tribunal the fact that one party or the other had been obstructive or had approached the conciliation process with no intention of genuinely participating in the attempt to reach a settlement. Given the Minister's overall agenda, it is essential that he address the point. It must be made clear to both parties that, if they do not seriously engage in the conciliation process, their conduct—or misconduct—may count against them when the tribunal considers whether costs or expenses should be awarded.

Alan Johnson: We discussed that fundamental point this morning. The amendment could have serious consequences that the hon. Gentleman does not intend. It would undermine rather than enhance conciliation. The hon. Gentleman suggests that the conciliation officer should make an assessment of the merits of a tribunal application. More importantly, he suggests that if such an assessment showed that the case had no reasonable prospect of success, the conciliation officer should communicate that to the relevant party and to the employment tribunal, so that the tribunal could take it into consideration when deciding if it wished to make a cost award.

The hon. Gentleman's suggestion has the potential to undermine ACAS seriously and considerably. He said that he accepts that ACAS could play an important role; the point is that ACAS does play an important role. It accounts for settlements in 38 per cent. of employment tribunal claims, and it has an enormous effect on the 37 per cent. of cases that are withdrawn. Put simply, if ACAS conciliators were involved in assessing a case and reporting its findings to the tribunal, key features of conciliation—not just confidentiality but impartiality—would be severely undermined.

Conciliation officers can and do discuss the merits of the case with the parties. They outline its strengths and weaknesses and play devil's advocate. That is an important part of their role and is key to ensuring that the applicants and respondents consider the merits of their case. It is safe to assume that both parties consider such comments when deciding to settle or withdraw the case. They have listened to the conciliation officer going through the confidential, impartial process, which is a crucial part of conciliation.

Mr. Hammond: The Minister describes a case in which both the applicant and the respondent behave reasonably. They listen to the conciliation officer and what he says informs their decisions about how to behave. However, the hon. Gentleman did not address the situation that I had in mind when drafting the amendment, that of an unreasonable applicant or respondent who does not listen or genuinely engage in the conciliation process. How would the Minister deal with someone whose conduct showed that he had no genuine intention to seek a settlement?

6.15 pm

Alan Johnson: I have spoken to the conciliators, who do a skilled job. Many applicants or respondents who enter the conciliation process with the frame of mind that the hon. Gentleman describes—he is right to say that some are completely unreasonable and it wastes everyone's time—end up being persuaded to accept a conciliated settlement. If they do not, the conciliators would have to say, ''If you put us in a position where we are part of the judicial process, albeit on the grounds of behaviour, we will have to make a report to the tribunal.'' They should not become part of the judicial process as that would weaken and question their impartiality. That is an important change in their role. People who do the job believe that it would have a profoundly damaging effect. I agree with ACAS that impartiality and confidentiality are crucial to its enormous success; about 75 per cent. of cases are withdrawn or conciliated.

The proposal would have an adverse impact on the behaviour of the parties involved; if a potential outcome of conciliation could be a report to the tribunal it would undermine open and honest discussion, which is the key to settling cases.

For those reasons, I ask the hon. Gentleman to withdraw the amendment. I sympathise with any attempt to promote conciliation but I am anxious that in attempting to deal with a particular problem, the amendment runs the risk of creating a new set of problems. As we need ACAS to take an even more important role, it would simply undermine that process. If the hon. Gentleman does not ask leave to withdraw the amendment, the Committee should oppose it.

Rob Marris: In terms of confidentiality, the cure proposed by the amendment is worse than the disease. The word ''behaved'' reminds me of an episode of ''Not the Nine O'Clock News'' in which someone was nicked by a police officer for smiling aggressively, which I thought was quite funny until a couple of years ago, when that happened to someone in south London.

''Behaved'' is a loaded word and ACAS officers are not psychiatrists. Faced with the proposed subsection, if I were still practising law and acting for an applicant, I would advise my client to have nothing to do with ACAS and take the right to silence, because all that ACAS officer could do in that case would be to say, ''I am going to write to the tribunal saying that you behaved badly because you wouldn't talk to me.'' That would be fine; I would tell my client to go right ahead, because the alternative would be that my client might speak to ACAS and, as it were, hang himself. He would have a bad mark against him at the tribunal from the ACAS officer's report. As a non-practising solicitor, Mr. Amess, you might expect me to say it, but confidentiality is absolutely crucial to the negotiations and conciliations and the amendment would dilute it in an unhelpful way.

Mr. Hammond: I do not agree with the argument advanced by the Minister or by the hon. Member for Wolverhampton, South-West. We must distinguish between confidentiality in substance and it being able to cloak procedure and one's approach to the procedure. The hon. Gentleman does not like the word ''behave'' and I accept that the drafting of the amendment is not perfect. Clause 22 uses the phrase ''conduct of the proceedings'', so I think that a conciliation officer could report that one or both parties had conducted themselves in a way that was not conducive to serious attempts at conciliation.

I raise the issue—this builds on what we discussed in the last few debates—because there is a provision for the award of costs, which is an important safeguard for respondents. By definition, respondents do not initiate action; they are forced to defend themselves against an action initiated by someone else. The provision enabling respondents to recover costs in an unreasonable or vexatious tribunal case against which they have had to defend themselves is an important part of creating an equitable system.

With the introduction of conciliation to the process, the definition of unreasonableness should include what happens in the conciliation part of the process. After all, we are talking about an application and then a postponement for a fixed period for conciliation to take place. The conciliation period is within the overall time frame of the tribunal proceedings, so it would be fair and reasonable to consider it as part of those proceedings when it comes to the question of a party's unreasonable or vexatious conduct.

The Minister is making a bit of a mountain out of a molehill in saying that my proposal would fundamentally undermine the conciliation process. I am not suggesting that the substance of the case or the details of what happened previously that are explained to the conciliation officer should be relayed to the tribunal. To ensure equity in the tribunal's decision about awarding costs, I am suggesting merely that the officer should have the power, when he feels it necessary, to convey to the tribunal a succinct phrase relating to the conduct of one or both parties during the conciliation phase. I am disappointed that the Minister does not accept my argument.